Too Many Workers Miss Out On The Full Employer Match

8/11/17 8:00 AM

For the third quarter in a row, Americans’ retirement account balances have climbed to an all-time high, according to a new report from Fidelity Investments. Specifically, the average 401(k) balance rose to $97,700 in Q2 2017, and the mean IRA balance lifted to $100,200. Those are significant gains from $73,300 and $73,100 five years ago, respectively, and largely a reflection of the rapidly rising stock market. However, the multi-year economic expansion in the U.S. has also supported the growth in Americans’ retirement account balances, as a strengthening labor market has enabled more people to find jobs that provide workers with access to a 401(k) or similar tax-advantaged savings vehicle. Further, wage gains have been modest in recent years but household balance sheets have still managed to improve substantially, in turn allowing Americans to add money to their retirement accounts at a record pace. For example, 401(k) participants have contributed an average of $5,850 to their accounts over the past twelve months, according to Fidelity, an all-time high.

As encouraging as such statistics are, the report also revealed that there is still a lot of room left for improvement. Roughly one in five workers, for instance, were not contributing enough to their 401(k) plan in Q2 to take full advantage of the matching contributions offered by their employer. Over time such behavior can result in thousands of dollars in forgone matching contributions but on the bright side, most (53 percent) of these participants were found to be only 1 or 2 percentage points away from receiving the full match. In summary, Kevin Barry, president of Workplace Investing at Fidelity Investments, stressed that “While many employers have made it easier to enroll and get started in their 401(k) plans, employees need to verify they are they are taking full advantage of their company's matching contributions. Nearly 90 percent of employees are eligible for some sort of company match, so it's important to know what your company offers and make every effort to save enough to get the full match. If not, you're essentially leaving free money on the table.”